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Innovation: Retail Innovation

We discussed last week the different types of behavior involved in the process of adopting a new innovation.

Retail has the same types. You have the innovators leading the way and you have the laggards at the other extreme. Two totally separate types of people, yet both crucial to achieving a successful retail innovation. (Need a refresher? Refer back to Blog #1)

The retail industry is faced with the challenge to innovate at its fastest pace ever, mostly due to the growth of e-commerce and the changes in consumer preferences. And this pressure to innovate has driven retailers to experiment on many aspects of their business.

Everyone needs to play a part for innovation to happen given that retail innovation involves breaking old habits and developing new ideas, products, or concepts to better consumer experiences and optimize a retailer’s business.

The stakes have never been higher due to the constantly increasing levels of competition in the space, coming from every country and in every category. Some are even led by online retailers. But no matter where they are located or what they sell, retailers are all attempting to engage consumers directly, fighting over the limited attention, desires, and budgets customers have these days.

Historically, retailers focused more on innovating in areas that people can see. Some impactful innovations introduced decades ago that are still in use today include barcode scanning, UPCs, and automatic doors. But in 2017, innovation is much more than that. A change on the “front end” requires multiple changes on the backend, which then further requires changes to the basic functionalities of the company. The complexity of  retail innovation is astounding, and a bit overwhelming. But still doable.

Let’s start with the easiest: in-store and online experiences.

As e-commerce grows and in-store shoppers persist, retailers focus their innovation on both brick-and-mortar and digital options, wanting to ultimately impact and improve the overall customer experience. In brick and mortar, some innovations include: digital signage, smart dressing rooms, interactive aisle displays, and guest wifi. And in digital: mobile apps, social media, gifting, and loyalty programs.

A few of these innovations, such as mobile apps and smart dressing rooms, are easily installed and adopted and have taken off in popularity with retailers and consumers.

However others, like beacon technology, are not.

Beacon technology enhances customers’ in-store shopping experience by making engagement more personalized and effortless for the consumer. Technology such as this require back-office functional changes, for retailers must be able to quickly and seamlessly scale back-office analytics so they can capture necessary information to target shoppers and augment the user experience. And changes like this are challenging, time-consuming, and costly up-front (even if the long-term payout is high). Thus, the adoption rate of these innovations is slower than expected.

Innovation in omni-channel is even more challenging.

“Omnichannel commerce” is a recurring buzzword in the retail industry, however there’s still a great deal of confusion around the topic itself.

Consumers, the drivers of this “omnichannel commerce,” are one of the greatest challenges for retailers who are trying to maximize their omnichannel potential. According to 1WorldSync’s Charting Course for Global Commerce, 53% of merchants and suppliers experience a knowledge gap within their organization when it comes to understanding the value of cross-channel capabilities. There are those who strictly buy online, there are others who only buy certain products online and certain in-store, and then there are the devoted brick and mortar shoppers. The behaviors are inconsistent, leading to incredible difficulty in developing and managing patterns.

So while retailers are striving to innovate in this space, few have succeeded. Fifty-one percent of merchants cannot support mobile commerce and 80% don’t integrate product information management across web, mobile, applications, and physical stores.

The biggest challenge, though, is integrating ‘multichannel’ inventory management to achieve utmost visibility across sales channels. Retailers are still struggling for a way to manage and combine the complexities of connecting the systems that are in-store with those that are online, so they can’t create a complete picture of their customers.

So far we’ve covered retail innovation for customers (in-store and digital) and for retailers about their customers (omnichannel commerce).

Now we will look at innovation for retailers in regards to their product: the supply chain.

The key to innovation for the supply chain is actually taking a look at the consumers, understanding their wants, needs and desires, and then working upstream from there. Retailers must harness and translate the huge amount of information they are collecting on their customers in order to enhance and support business operational decisions. Innovations could include creating models of predicting shopper behavior to influence the supply chain, digitizing the supply chain itself to make it more flexible to changes in consumer behavior, and having visibility to know what is and isn’t selling to move product faster.

Such changes will then allow retailers to improve their speed to market, shrink their costs, and reduce their excess inventory. And they all can be critical to the difference between a good season and a great one.

And while excess inventory will always exist, it can be diminished and turned from an obstacle into a solution with innovative technology. For example, INTURN encounters brands with excess inventory every day. Before INTURN, brands spent hours and hours on spreadsheets, googling style numbers, and researching buyers to take their excess. Now, INTURN provides the innovative solution so that brands and retailers can sell and buy excess inventory efficiently, and profitably. And this is just one of the many innovations in retail that is optimizing the way brands, retailers, and consumers operate.

Innovation is key to the success of retail. Whether it’s visible changes in-store or online, changes to how retailers view and handle their customers, or optimizations of supply chain and internal visibility, retailers need to focus on all aspects of their business, not just what is easiest or what their customers can see.

Check back next week for a discussion on change in innovation.